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Retail Businesses: Hourly vs. Salaried Employee Payroll (2026)
Hourly versus salaried in a retail business is not a preference, it is the exemption test: a salary of at least $684 a week plus a duties test, and retail businesses have industry-specific exemptions on top. Retail salespersons at the national median earn $681 a week. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Who in a retail business can be salaried and exempt
Commissioned employees of a retail or service establishment are exempt from overtime under section 7(i) only when three conditions are met: the employee works for a retail or service establishment, the regular rate exceeds one and one-half times the minimum wage for every hour worked in an overtime week, and more than half of total earnings in a representative period of one month to one year are commissions. If any condition fails, overtime is owed at time and one-half for hours over 40.
Workers aged 14 and 15 may work in retail jobs such as cashiering, bagging groceries, and stocking shelves, but only outside school hours, no more than 3 hours on a school day, 18 hours in a school week, 8 hours on a nonschool day, 40 hours in a nonschool week, and between 7 a.m. and 7 p.m. (9 p.m. from June 1 through Labor Day). Workers under 18 may not operate balers or compactors, and 16- and 17-year-olds may only load certain scrap paper balers under specific rules.
The salary math for retail businesses
The standard salary level is $684 a week, $35,568 a year. BLS puts the May 2025 national median for retail salespersons at $35,410, which is $681 a week, below the floor, so that role is non-exempt regardless of duties. Paying a salary to a non-exempt employee is legal; it just does not remove overtime, which is then computed on the salary divided by hours actually worked each week.
What changes when a role moves between the two
Moving sales associates and cashiers from hourly to salaried changes the pay code, the timekeeping rule and the overtime treatment at once. A salaried non-exempt employee still needs hours recorded every week, and a salaried exempt one needs the exemption documented against the rule above, because in an audit the burden of proving the exemption sits with the employer.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Commissioned employees of a retail or service establishment are exempt from overtime under section 7(i) only when three conditions are met: the employee works for a retail or service establishment, the regular rate exceeds one and one-half times the minimum wage for every hour worked in an overtime week, and more than half of total earnings in a representative period of one month to one year are commissions. If any condition fails, overtime is owed at time and one-half for hours over 40. [DOL Fact Sheet #20]
- Workers aged 14 and 15 may work in retail jobs such as cashiering, bagging groceries, and stocking shelves, but only outside school hours, no more than 3 hours on a school day, 18 hours in a school week, 8 hours on a nonschool day, 40 hours in a nonschool week, and between 7 a.m. and 7 p.m. (9 p.m. from June 1 through Labor Day). Workers under 18 may not operate balers or compactors, and 16- and 17-year-olds may only load certain scrap paper balers under specific rules. [DOL Fact Sheet #43]
Read the full guide to FLSA overtime rules for employers, and the rest of the retail business payroll library.
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Frequently Asked Questions
Can a retail business pay sales associates a salary and skip overtime?
Only if the role meets an exemption: the $684 weekly salary floor plus the duties test, or an industry-specific exemption. Commissioned employees of a retail or service establishment are exempt from overtime under section 7(i) only when three conditions are met: the employee works for a retail or service establishment, the regular rate exceeds one and one-half times the minimum wage for every hour worked in an overtime week, and more than half of total earnings in a representative period of one month to one year are commissions.
Does the $35,410 national median for retail salespersons clear the salary test?
$681 a week is below the $684 floor, so a role paid at that level is non-exempt on salary alone. BLS OEWS, May 2025.
What does managed payroll cost for a retail business?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. High turnover and new-hire volume, multi-location payroll and seasonal overtime spikes are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Retail Businesses. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Overtime Pay Under the FLSA
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